March 15, 2007 2:54 PM PDT
Cisco makes big bet on Web conferencing
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What's more, WebEx is sold as a subscription service, which is a business model that Cisco has no experience selling. Giancarlo said he sees potential in expanding subscriptions to other parts of Cisco's business. For example, the WebEx service could be used for selling security services or other unified communications services. But Giancarlo said it was important for Cisco to have a team that understood how to make such a business work.
"The market is far enough along that trying to acquire a string of pearls wouldn't be competitive," he said. "Secondly, when we go into new areas that we've never been before, like providing subscription services, we feel it's important to acquire the experience of a company that is already executing well."
Cisco used a similar strategy when it first started addressing the home networking market, which sells products through retail stores. Cisco had never had a retail presence. So it bought one of the biggest brands in the home networking market, Linksys, to figure out how to sell low-margin products and sell them in stores like Best Buy and Fry's Electronics.
In addition to gaining market share and subscription service expertise, Cisco is also getting important technology that fits into its current product strategy. WebEx's on-demand collaboration service, which includes online meeting, Web conferencing and video conferencing applications, is a nice complement to Cisco's unified communications products, which also promote collaboration among workers.
WebEx's service is also ideally suited for small and midsize businesses, which may not be able to afford expensive video conferencing gear. Cisco already generates about 25 percent of its business from this market.
But most important, WebEx will keep Cisco on par with its largest rival and most important partner in unified communications, Microsoft. The desktop software giant announced its acquisition of a Web conferencing company called PlaceWare in January 2003. The product later became known as Live Meeting, and also became the foundation for Microsoft's Live Communication Server, which competes directly with Cisco's unified communications products.
"Microsoft has stolen much of the thunder from Cisco of late in unified communications," Kerravala said. "And it's fair to say that Cisco was lagging here. Microsoft bought PlaceWare and Citrix bought Expertcity years ago. So online, real-time communications has been a part of other companies' visions for a while."
In addition to complementing Cisco's unified communications products, the WebEx service and technology will also work well Cisco's "telepresence" products. In October, Cisco introduced a new videoconferencing package called Cisco TelePresence Meeting that's designed to bring a new level of quality to videoconferencing so participants feel like they're actually sitting in the same room with people who may be halfway around the world. Because WebEx already offers application collaboration, Giancarlo and team say, it could easily work well with companies that are meeting virtually via Cisco's telepresence rooms.
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